The federal government today revved up its campaign against fraud in the
nation's E-Rate program, announcing a 22-count indictment against six
companies and five individuals.

The indictments follow two convictions for fraud and two settlements last year in the $2.25 billion program that helps schools and libraries
connect
to the Internet.

Thursday's indictments by a San Francisco grand jury charge the
companies
and the individuals with wire fraud, collusion, aiding and abetting, and
conspiracy in connection with E-Rate projects.

"Collusion by competitors in the E-Rate program, such as bid rigging and
project allocation, steals funds from some of our nation's neediest
schools," R. Hewitt Pate, assistant attorney general in charge of the
Department of Justice's (DOJ) Antitrust Division, said in a statement.
"Those who try to illegally profit from this important program will be
prosecuted."

The DOJ claims the defendants entered into various schemes to defraud
the
government on E-Rate projects at 11 school districts in California,
Michigan, South Carolina, Arkansas and Wisconsin from 1998 to 2003.

According to the indictment, the wire fraud counts stem from the
defendants
hiding the cost of equipment and fees not covered by the program within the
cost of covered equipment. The indictment says the defendants then
misrepresented to the school program administrator the amount of matching funds the schools needed in order to apply for
program funds.

The collusion counts allege that on the 1999, 2000 and 2003 E-Rate
Projects, the defendants allocated and rigged bids for the charged projects. The
indictment further alleges that the defendants conspired to violate the
mail
and wire fraud statutes in applications made to the E-Rate program for
the
2003 projects.

"This alleged nationwide fraud scheme deprived underprivileged schools
from
a valuable Internet access program and much needed funding. This
indictment
sends a strong signal that defrauding federal programs and thereby
jeopardizing future funding opportunities for schools will lead to
criminal
charges," said U.S. Attorney Kevin V. Ryan.

The wire fraud charges and the conspiracy to commit wire and mail fraud
charge are violations that carry a maximum penalty per
count of five years in jail, one year of supervised release and a
$250,000
fine for individuals. Businesses face a maximum penalty per count of a $500,000 fine,
plus a
requirement to make restitution to the victims of the crime.

The collusion (bid rigging and project allocation) carries for
individuals a
maximum penalty per count of three years in jail, one year of supervised
release and a $350,000 fine, and for organizations, a maximum penalty per
count of a $10 million dollar fine.

According to the DOJ, the maximum fines for the violations charged, for
both
individuals and organizations, may be increased to twice the gain
derived
from the crime or twice the loss suffered by the victim of the crime, if
either of those amounts is greater than the statutory maximum fine.

Companies named in the indictment include Video Network Communications of Portsmouth, N.H.; Howe Electricof Fresno, Calif.; Sema4 and Digital Connect Communications of San Juan Capistrano, Calif.;
Expedition Networks of North Hills, Calif.; and ADJ Consultants of Temecula, Calif.

Individuals named include Judy Green of Temecula, a former sales
representative for VNCI and co-owner of ADJ; Allan Green of Temecula,
co-owner of ADJ; George Marchelos of Saratoga, Calif., a former sales
representative for VNCI; Steven Newton of San Juan Capistrano, a former
vice
president at Premio Computer; and Earl Nelson of Sonora, Calif., a
former branch manager for Inter-Tel Technologies.

In December, Inter-Tel Technologies agreed to pay a total of $8.71 million
in
criminal fines, civil settlement and restitution for its part in rigging
E-rate bids. In a two-count felony charge, Inter-Tel, a subsidiary of
Arizona-based Intel-Tel Technologies, was charged with one count
of
allocating contracts and submitting rigged bids for E-rate programs in
Michigan and California.

The company also was charged with one count of wire fraud and aiding and
abetting by willfully entering into a scheme to defraud the program in
San
Francisco. The illegal practices by Inter-Tel cited by the DOJ included
inflating bids, submitting false and fraudulent documents to cover
ineligible E-Rate items, and submitting fraudulent documents to the DoJ
inquiry.

The company joins a subsidiary of NEC America as the first two firms to
plead guilty to E-Rate fraud. Under a May plea deal, NEC Business
Network
Solutions agreed to pay $20.6 million to settle criminal charges
involving the company's participation in the E-Rate program.

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